U.S. Adds 200K New Jobs, Unemployment Falls to 8.5%

Arthi Gupta
06 Jan, 2012
New York City

The U.S. indexes edged higher after the economy added 200,000 net new jobs and the unemployment rate declined to 8.5% in December. Japan-based Marubeni acquired 35% stake in Eagle Ford Shale. The euro faced more headwinds as Spanish and Italian bonds yields rise.

[R]9:35 AM New York – The U.S. indexes edged higher after the economy added 200,000 net new jobs and the unemployment rate declined to 8.5% in December. Japan-based Marubeni acquired 35% stake in Eagle Ford Shale. The euro faced more headwinds after the yields on Spanish and Italian bonds rose.[/R]

U.S. indexes gained after non-farm payrolls rose more than expected in December. The private sector gains were trimmed by the cuts in the government payrolls and the December same store sales met expectations.

Yesterday, U.S. retailers reported improved comparable-store sales for December on higher sales in last two weeks to Christmas Day but needed heavy discounting.

Limited Brands, Target, Ross Stores, Nordstrom, JC Penney and Macy's, reported increase in sales but sales at Kohl's, Gap and Wet Seal declined.

However, the euro zone worries overhang the market sentiment as bond yields rose and Italy and Spain prepare to ramp up debt auctions next week. Markets were also unnerved after the new government in Spain estimated deficit in the social security account of €668 million compared to a slight surplus estimated earlier.

The benchmark indexes in Europe traded higher after the successful debt auction from the European rescue fund but bond yields rose for Spain increased to 5.7% and Italy rose to 7.2%

Market indexes gained in the first week of trading but the euro faced decline of more than 2% against the dollar as banks prepare to raise more capital at a heavily discounted share price and Spain estimated sharply higher bank reserves to account for bad property assets.

Spain’s economy minister was quoted as saying that lenders will have to set aside as much as €50 billion, which amounts to 4% of Spain’s GDP, in extra provisions on bad property assets.

The estimate was sharply higher than expected by many private analysts and also bolstered the proposal from the European Banking Authority that Spain’s five largest banks need €26 billion in new capital.

The Asian markets closed lower as investors feared that the euro zone nations debt rollover of more than €270 billion may overwhelm the markets.

U.S. Non-Farm Payrolls Rise

U.S. job growth rose more than estimated in December, according to data released by the U.S. Labor Department today.

The economy added a net 200,000 new jobs in December, with the addition of 212,000 private sector jobs more than offsetting a loss of government jobs, according to the report.

The unemployment rate declined to 8.5% in December from the November unemployment rate that was revised up to 8.7% from the initial estimate of 8.6%.

Marubeni Acquires Stake in Eagle Ford Shale

Marubeni Eagle Ford Limited Partnership, a U.S. subsidiary of Marubeni Corporation entered into an agreement with Dallas based Hunt Oil Company, a privately-owned independent oil and gas company to acquire a 35% working interest in the Eagle Ford shale oil and gas play covering approximately 52,000 net acres of oil and gas leases located in Texas.

Earnings Review

Family Dollar Stores, Inc. ((FDO)), the retailer stated first quarter revenues increased 7.6% to $2.148 billion from $1.997 billion last year. On a same store basis, sales in the quarter increased 4.1%.

Net income in the quarter rose 8% to $80.4 million or 68 cents per diluted share compared to net income of $74.3 million or 58 cents per share a year ago.

IHS Inc. ((IHS)), the business information services company said fourth quarter revenue rose 27% to $371 million, from $293 million in the year earlier quarter. Net income in the quarter slumped 38% to $22.7 million, or 34 cents per diluted share compared to net income of $36.5 million, or 56 cents per share last year.

PriceSmart, Inc. ((PSMT)), the operator of membership shopping warehouse clubs reported first quarter total revenue climbed 24% to $478.69 million compared to $386.07 million in the prior year.

Net income in the quarter declined 6% to $13.99 million or 47 cents per diluted share compared to net income of $14.85 million or 50 cents per share the prior year.

Samsung Electronics Co., Ltd., the South Korean conglomerate estimates operating profit for the fourth quarter to surge about 73% from last year to be 5.20 trillion won or about $4.5 billion, boosted by strong sales of its Galaxy smartphones.